Correlation Between Spire Global and Earth Science

Can any of the company-specific risk be diversified away by investing in both Spire Global and Earth Science at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Spire Global and Earth Science into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Spire Global and Earth Science Tech, you can compare the effects of market volatilities on Spire Global and Earth Science and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Spire Global with a short position of Earth Science. Check out your portfolio center. Please also check ongoing floating volatility patterns of Spire Global and Earth Science.

Diversification Opportunities for Spire Global and Earth Science

-0.48

Correlation Coefficient

Spire Global  Earth Science

Very good diversification

The 3 months correlation between Spire and Earth is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding Spire Global and Earth Science Tech in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Earth Science Tech and Spire Global is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Spire Global are associated (or correlated) with Earth Science. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Earth Science Tech has no effect on the direction of Spire Global i.e., Spire Global and Earth Science go up and down completely randomly.

Pair Corralation between Spire Global and Earth Science

Given the investment horizon of 90 days Spire Global is expected to generate 5.95 times less return on investment than Earth Science. But when comparing it to its historical volatility, Spire Global is 2.86 times less risky than Earth Science. It trades about 0.04 of its potential returns per unit of risk. Earth Science Tech is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  4.00  in Earth Science Tech on September 4, 2024 and sell it today you would earn a total of  9.00  from holding Earth Science Tech or generate 225.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Spire Global  vs.  Earth Science Tech

Spire Global

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Spire Global are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. Even with relatively unfluctuating forward indicators, Spire Global reported solid returns over the last few months and may actually be approaching a breakup point.

Earth Science Tech

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Earth Science Tech are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Earth Science unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Spire Global and Earth Science

The main advantage of trading using opposite Spire Global and Earth Science positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Spire Global position performs unexpectedly, Earth Science can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Earth Science will offset losses from the drop in Earth Science's long position.

The idea behind Spire Global and Earth Science Tech pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.